Bath & Body Works: Earnings Beats, Strong Support and Room to Run

Historically, this stock channels much more than it grows, relying on dividends to keep shareholders happy

• Bath & Body Works has been channeling between $25 and $50 for over two years.
• The company has not recovered from the Liberation Day sell-off despite strong fundamentals and forward guidance.
• Forward earnings and forward P/E ratio are both below historical averages and their peers’ numbers.
• When sentiment catches up with the fundamentals, the retailer has room to run to $40 and beyond

Bath and Body Works (BBWI) (not to be confused with the bankrupt Bed Bath and Beyond (BBBY)) isn’t generally a stock that comes to mind when you think about a strong grower — and that’s for good reason. Historically, this stock channels much more than it grows, relying on a strong quarterly dividend to keep shareholders happy. 

But channels present opportunity. 

For over two years now, BBWI has comfortably channeled between $25 and $50, never breaking those levels for more than a day or two at a time. It currently sits right at the bottom of this range, trading at around $27 at the time of this writing, and I believe it will make a return to the top end of this channel very soon. 

Short-term pullback, long-term opportunity

BBWI is down 35% from its 2025 high of $42 in February, despite no major changes to its long-term outlook. Much of this sell-off came from the Liberation Day tariff announcement in early April, when L Brands’ stake was divested, putting temporary pressure on the stock because of technical selling. 

No meaningful downgrade in fundamentals or guidance accompanied the sell-off; the market is likely misinterpreting the selling as a reflection of company weakness instead of a structural portfolio move from L Brands. For investors with a three-six-month time horizon, this could represent a classic short-term dislocation with long-term upside potential. 

Three years of history say this is the floor

BBWI has consistently bounced off the $25-$28 range numerous times since as early as 2021, including during broader market downturns. This three-year support level held through COVID aftershocks, inflation panic, Fed tightening and Liberation Day. The stock’s current price puts it squarely in the middle of this historical demand zone. 

Traders watching the chart could see this level as a natural area to start building long exposure or sell downside premium. With limited downside historically below this level, the risk/reward setup looks very attractive to me at the current price. 

Solid numbers in a challenging retail landscape

BBWI has beaten earnings-per-share (EPS) estimates for eight consecutive quarters, signaling strong operational control and cost discipline despite the changing retail landscape. In its most recent earnings report, the company not only beat EPS expectations but also reported a 2.9% increase in net sales year-over-year, a gross profit rate of 45.4% and an 11.8% increase in operating income. 

These most recent numbers all indicate strong operational efficiency and financial security; something the share price does not currently reflect. Beyond just the raw numbers, the company has also started up a number of strategic initiatives and innovations, including a collaboration with Disney (more on that later), which have boosted performance. 

Wall Street still believes

Currently, 12 of 18 analysts covering BBWI have rated it a “buy,” while the remaining six consider it a “hold.” There are no major “sell” ratings on the stock from any reputable individual analyst or research group. The 12-month median price target among these analysts lies at $35, an increase of almost 30% from the current $27 level. 

BBWI also trades at just 9.5x forward earnings, well below its five-year average of 14x, suggesting potential upside if sentiment reverts to historical norms. Beyond this attractive ratio, the stock continues to return capital to shareholders via its 2.7% dividend yield and an ongoing share repurchase program, which tends to appeal to institutional buyers in value setups.

More than candles: BBWI’s brand evolution

While candles remain a staple, BBWI has expanded aggressively into personal care, skincare, and men’s grooming, with new product lines outperforming expectations. The My Bath and Body Works rewards program also continues to grow, now boasting over 40 million members and providing BBWI with direct marketing access and plenty of customer data. 

The company has also recently redesigned its stores to emphasize modernization and efficiency while simultaneously closing underperforming locations. The shift toward smaller high-margin stores matches changes in consumer shopping habits. 

Its e-commerce segment has also continued to grow, currently accounting for 22% of total sales, up from 18% pre-2020. This illustrates stickiness, even post-pandemic, and strengthening margins with fewer overhead costs. 

BBWI is cheap — and it pays you to wait

BBWI is trading at a forward P/E of about 10, significantly below its five-year average of about 16, and well below peers in the specialty retail space like Ulta Beauty (ULTA) at 18 and e.l.f. Beauty (ELF) at 23. At the same time, BBWI offers a 2.7% dividend yield, far higher than many of its retail peers, and it has consistently maintained it even through challenging quarters. 

Besides the dividends, the company also continues to return capital to shareholders through aggressive buybacks, which have reduced outstanding shares by over 10% since the they began in 2022. They also have good balance sheet discipline with a manageable debt load of about $4.3 billion, compared to its $1.1 billion in cash — enough to earn a respectable BB+ credit rating with a stable outlook. 

Trading near a three-year support with strong fundamentals, BBWI presents a compelling value setup for both income and growth-oriented investors. 

Everything lines up … except the price

BBWI has delivered strong earnings, maintained guidance, and continues rewarding shareholders. Yet, the stock is down almost 30% from its yearly highs and sits at a multi-year support level. Shares haven’t recovered from the April sell-off triggered by broader macro fears despite the absence of any BBWI-specific negative catalysts. 

Options flow and sentiment have skewed bearish after the sell-off, but the fundamentals do not support this pessimism; analyst sentiment remains bullish and buybacks are still active. With downside risk seemingly limited to $25 and upside potential of $40 and beyond, this stock offers a strong asymmetric setup. 

Sometimes price just lags. Markets aren’t always efficient in the short run; BBWI may simply be value hiding in plain sight until sentiment catches up with reality.

Gus Downing is host of the tastylive Network show Risk and Reward. @GainsByGus
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